Following the line of Eskom’s plundered billions
‘The amounts were criminally inflated by those who negotiated the contracts’
THE looting of state-owned power utility Eskom has been laid bare after Public Enterprises Minister Pravin Gordhan revealed the companies that were allegedly linked to the R4 billion “overpayment” tied to the construction of the Kusile power station.
Several of these cases have already been referred to the National Prosecuting Authority for further investigation.
While most of the Eskom employees implicated in the scandal have since resigned, Eskom is considering civil action to recoup the “stolen” money.
Prompted by a query from Parliament’s Standing Committee on Appropriations in February, where Eskom was requested to provide a progress report on investigations into the overpayment of contractors, Gordhan wrote to ANC Chief Whip Pemmy Majodina this week.
He attached a briefing document on the Kusile power station contract investigations dated June 10 to the letter, which The Mercury has in its possession.
According to the report, the R4bn overpayment was made to Stefanutti Stocks-Basil Read Joint Venture, Stefanutti Stocks Izazi Joint Venture, ABB South Africa and Tubular Construction Projects.
For the Joint Ventures, the estimated overpayment was R1bn. ABB SA and Tubular Construction Projects were each paid R1bn, while while R735 million went to Tenova Mining and Minerals SA.
Speaking to The Mercury yesterday, Eskom spokesperson Sikonathi Mantshantsha said the word “overpayment” was being abused.
It was the view of the power utility’s current management “that these amounts were criminally inflated by those who negotiated the contracts” five years ago, he said.
He clarified that this did not mean Eskom had erroneously paid contractors R4bn.
“The R4bn is what Eskom management estimates to be criminally inflated by those involved in negotiating the contracts to enrich themselves and others,” Mantshantsha said.
He said that when the “over-payment” was found out, Eskom had laid “dozens” of criminal charges – some of which have already yielded positive results.
He was referring to two former senior Eskom managers arrested for alleged fraud, corruption and money laundering to the tune of R745m related to one of these contracts. They were arrested alongside two contractors last December.
Mantshantsha said the utility was reviewing these contracts to identify all those who played roles in looting Eskom and were still employed by the power utility.
He said that while some were undergoing disciplinary hearings, he could not divulge anything further.
While ABB have verbally offered to pay back approximately R240m, Mantshantsha said, they were still in negotiations with the other companies to do the same. However, it was not guaranteed that these companies would agree, he said.
“If there is no agreement, we will have to approach the courts to set these contracts aside and declare them null and void.”
“As one expects, not all those incriminated would just own up and agree to pay back the money.
“They would deny it, we would have to prove it and then go from there,” he said.
In response to the report, Stefanutti Stocks disputed the allegation that the firm had been overpaid.
“We have considered the briefing document and notes, for the benefit of shareholders in particular, that the investigations being carried out by and on behalf of Eskom are not complete.
“That said, we dispute that it, or the joint ventures in which it participates, have been overpaid,” the company said in a voluntary Stock Exchange statement yesterday.
It added that the group was pursuing a number of contractual claims and compensation events on public sector power projects involving Eskom, and due to the complexity of the claims, the processes remained ongoing.
Stefanutti Stocks added that during the period between 2015 to 2018, payments made by Eskom to the Stefanutti Stocks-Basil Read Joint Venture (“SSBR JV”) were all made consequent to certificates issued by the independent engineer.
“During that period, representatives of the engineer and Eskom carried out audits of the SSBR JV records and the payment certificates were issued after they had satisfied themselves that the costs claimed were actually and validly incurred in the construction at Kusile.”
It also said that the SSBR JV was owed additional amounts in respect of work done since December 2018 and in respect of which payments have been withheld.
“SSBR JV and Eskom have both committed to a claims resolution process. This process remains ongoing.”
The company added that in February 2019, Eskom terminated the contract with Stefanutti Stocks Izazi Joint Venture (SSIJV), due to its inability to provide access to SSIJV to be able to complete the relevant works.
“Based on the works completed, as well as Eskom’s inability to provide access, Stefanutti Stocks contends that there are significant amounts due to it. SSIJV commenced an adjudication process to recover these additional amounts in 2018. This process is ongoing,” the company said.
Tenova Mining and Minerals South Africa (Pty) Ltd (TMMSA) said in a statement that the firm “acknowledges the investigation into its ongoing contracts with Eskom in relation to Kusile power station”.
“As the recent investigation report states, as soon as alleged wrongdoing was brought to Tenova’s attention we took swift action, implementing an independent investigation managed by reputable independent specialists.
“Since the outcome of the investigation is pending, we are unable to provide further commentary, save to say that TMMSA denies any suggestion that we have overcharged Eskom,” TMMSA said.
TMMSA said it had performed “significant and tangible work on the Kusile project and the price escalations on the project had arisen as a result of continued delays by Eskom over several years in providing access to the site.”
ABB SA spokesperson Eike Meuter said based on findings during an internal investigation, the company had selfreported to the Securities and Exchange Commission, the Department of Justice and various authorities in South Africa and other countries, “potential suspect payments and other compliance concerns in connection with some of the company’s dealings with Eskom and related persons”.
“Many of those parties have expressed an interest in, or commenced an investigation into, these matters and the company is co-operating fully with them. In its Q2 2019 financial information, ABB made it public that the company believes that there may be an unfavourable outcome in one or more of these matters,” Meuter said.
“As this is an ongoing investigation, we are restricted in the information that we can provide at this time. ABB enforces a strict, zero-tolerance policy for violations of the law or the ABB code of conduct, and we remain committed to preventing, detecting and resolving any integrity-related issues.”
Tubular Construction could not be reached for comment yesterday despite several attempts to make contact via telephone and email.
The R4 billion is what Eskom management estimates to be criminally inflated by those involved in negotiating the contracts to enrich themselves and others
Sikonathi Mantshantsha
ESKOM SPOKESPERSON